Picture du Jour: Gold price benefits from declining production

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With the bullion price (temporarily?) under pressure – and it really is anybody’s guess how the short term will unfold – a long-term metric such as gold production provides an interesting perspective.

Research by Cormark Securities (via US Global Investors – Weekly Investor Alert), shows that global gold production peaked in 2001 at 2,600 metric tons. World output has been steadily declining from that point because of lower grades and higher capital costs that are making it uneconomic for producers to bring new gold onto the market.

I expect the production trend to keep heading south and thereby provide solid support to the yellow metal in the medium term.

gold-price-3001

Source: US Global Investors – Weekly Investor Alert, January 29, 2010.

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1 comment to Picture du Jour: Gold price benefits from declining production

  • Tom

    Why do you expect gold production to continue to decline? Do you expect this decline to continue forever?

    Tom

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